Forceplaced insurance is bad! Why?
Forceplaced insurance only provides protection up to the amount you owe to the mortgage servicing company, and nothing goes to you the homeowner in the event of a covered loss. The cost of forceplaced insurance will then be added to your contract balance, and you will be paying a finance charge on the additional amount at the same rate listed in your contract. There is no protection for any home equity you may have accumulated in your home. Example: If you purchase your house for $100,000 and you have paid down your Mortgage principle by $30,000 ($100,000-$30,000 =$70,000 mortgage balance) and over that time the home value increased to $120,000 but your home burns to the ground, after the fire, the forceplaced insurance policy pays $70,000 to your mortgage servicing company to pay off the ,mortgage balance and you are paid nothing. You lose the equity in the home of $50,000.
